The possible approach and applied theory

The potential implications for China of combined global and domestic agricultural policy reforms have been the subject of many analyses in recent years. In some analyses, including this thesis, the net welfare effects are slightly negative; in others slightly positive.

To understand this outcome, it is useful to recall that the total welfare effect adds the impacts across both consumers and producers but always under the perspective of subsidies as a feasible and significant measure to smooth the world’s commerce. The higher world market prices for agricultural goods that would come with global agricultural policy reform bestow economic benefits on most of China’s farmers (e.g. those producing exportable agricultural

99  commodities), but also higher costs of agricultural imports on some consumers. Because agricultural trade constitutes only a relatively small share of total agricultural output in China (domestic agricultural production largely equals domestic consumption), these two effects offset each other leaving small net impacts on China’s overall economy from agricultural trade reforms. There is no doubt; however, that global agricultural policy reform is in the interest of China’s and world’s agreements on agriculture.

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Chapter 9: REFERENCES 

9.1. References

a. Abel, M. “Price discrimination in the world trade of agricultural commodities.” Economic Research Service, 194-204 pp. October, 1,989.

b. Agriculture Commission. “Agreement on Agriculture.” World Trade Organization (WTO), 43-71 pp. January, 1995.

c. Agriculture Department. “Crop prospect and food situation.” Food and agriculture organization (FAO), February, 2009.

d. Agriculture Department. “World food situation.” Food and agriculture organization (FAO), August, 2009.

e. Cahill, C., Legg, W. “Estimation of agricultural assistance using producer and consumer subsidy equivalents: Theory and Practice.” Agricultural Policies Division, 58, 14-43 pp.

July, 2003.

f. Commission Staff Working Document. “Agricultural commodity derivative markets: The way ahead.” Commission of the European Communities, 1447, 1-26 pp. September, 2009.

g. Food and agriculture organization (FAO), Organization for Economic Co-operation and Development (OECD). “Aglink-Cosimo partial equilibrium model”. OECD-FAO agricultural outlook 2008-2017.

h. Gilbert, C. “Trends and volatility in agricultural commodities prices.” State of research and future directions in agricultural commodity markets, 1-31 pp, March, 2004.

i. Hirschey, M. “Managerial Economics.” South Western Cengage Learning, 12^th. Edition, Canada, 2009.

j. Josling, T. “Price discrimination in the world trade of agricultural commodities: comment.”

Economic Research Service, 205-206 pp. November, 1,990.

k. Masters, W. “Agricultural price distortions and stabilization: Stylized facts and hypothesis

101  tests.” World Bank’s Development Research Group, 1-26 pp. August, 2008.

l. Mouhamad, A. “Agricultural Support Indicators”. National Agricultural Policy Center (NAPC), Policy Brief No. 28. August, 2008. 8 pp.

m. Organization for Economic Co-operation and Development (OECD). “Agricultural Support: How is it measured and what does it mean?” OECD Observer, 6. 1-8 pp. June, 2004.

n. Organization for Economic Co-operation and Development (OECD). “China: Review of agricultural policies.” OECD Publishing, 1260, 1-233 pp. May, 2005.

o. Phillips, R. “Pricing and revenue optimization.” Stanford Business Books, California, 2005.

p. Rakotoarisoa, M. “The impact of agricultural policy distortions on the productivity gap:

Evidence from rice Production.” American Agricultural Economics Association, Annual meeting, 1-39 pp. July, 2008.

q. Ronchi, L. “Fairtrade and market failures in agricultural commodity markets.” World Bank Policy Research, 4011, 1-62 pp. September, 2006.

r. Schnepf, R. “Price determination in Agricultural commodity markets: A primer.”

Congressional Research Service, 33204, 1-39 pp. January, 2006.

s. Summer, D. “Value of improved data for agricultural commodity policy analysis, with emphasis on food security.” Department of Agricultural and Resource Economics, University of California, 1-32 pp. September, 2000.

t. Talluri, K., Van Ryzin, G. “The theory and practice of revenue management.” Kluwer Academic Publishers, Massachusetts, December, 2004.

u. Tokarick, S. “Measuring the impact of distortions in agricultural trade in partial and general equilibrium.” International Monetary Fund (IMF) Working Paper, 110, 1-45 pp.

May, 2003.

v. Trade and Markets and Agricultural Development Economics Divisions. “Growing

102  demand on agriculture and rising prices of commodities.” Food and Agricultural Organization, Round Table organized during the Thirty-first session of IFAD’s Governing council, 1-21 pp. February, 2008.

w. Turvey, R., Cook, E. “Government procurement and price support of agricultural commodities: a case study of Pakistan.” Ministry of Overseas Development of Pakistan, 102-117 pp. March, 1972.

x. World Trade Organization (WTO). “Agricultural trade performance by developing countries 1990-1999.” Committee on Agriculture, Special Session, 6, 1-22 pp. January, 2001.

y. World Trade Organization (WTO). “Domestic support.” Committee on Agriculture, Special Session, 1, 1-32 pp. April, 2000.

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Chapter 10: APPENDICES 

10.1. FAOSTAT

“The FAO indices of agricultural production show the relative level of the aggregate volume of agricultural production for each year in comparison with the base period 1999-2001. They are based on the sum of price-weighted quantities of different agricultural commodities produced after deductions of quantities used as seed and feed weighted in a similar manner.

The resulting aggregate represents, therefore, disposable production for any use except as seed and feed.

All the indices at the country, regional and world levels are calculated by the Laspeyres formula. Production quantities of each commodity are weighted by 1999-2001 average international commodity prices and summed for each year. To obtain the index, the aggregate for a given year is divided by the average aggregate for the base period 1999-2001.

Since the FAO indices are based on the concept of agriculture as a single enterprise, amounts of seed and feed are subtracted from the production data to avoid double counting them, once in the production data and once with the crops or livestock produced from them.

Deductions for seed (in the case of eggs, for hatching) and for livestock and poultry feed apply to both domestically produced and imported commodities. They cover only primary agricultural products destined to animal feed (e.g. maize, potatoes, milk, etc.). Processed and semi-processed feed items such as bran, oilcakes, meals and molasses have been completely excluded from the calculations at all stages.

It should be noted that when calculating indices of agricultural, food and nonfood production, all intermediate primary inputs of agricultural origin are deducted. However, for indices of any other commodity group, only inputs originating from within the same group are deducted; thus, only seed is removed from the group “crops” and from all crop subgroups, such as cereals, oil crops, etc.; and both feed and seed originating from within the livestock

104  sector (e.g. milk feed, hatching eggs) are removed from the group “livestock products”. For the main two livestock subgroups, namely, meat and milk, only feed originating from the respective subgroup is removed.

The “international commodity prices” are used in order to avoid the use of exchange rates for obtaining continental and world aggregates, and also to improve and facilitate international comparative analysis of productivity at the national level. These “international prices”, expressed in so-called ”international dollars”, are derived using a Geary-Khamis formula for the agricultural sector. This method assigns a single “price” to each commodity.

For example, one metric ton of wheat has the same price regardless of the country where it was produced. The currency unit in which the prices are expressed has no influence on the indices published.

The commodities covered in the computation of indices of agricultural production are all crops and livestock products originating in each country. Practically all products are covered, with the main exception of fodder crops. The category of food production includes commodities that are considered edible and that contain nutrients. Accordingly, coffee and tea are excluded along with inedible commodities because, although edible, they have practically no nutritive value.

The indices are calculated from production data presented on a calendar year basis.

The FAO indices may differ from those produced by the countries themselves because of differences in concepts of production, coverage, weights, time reference of data and methods of calculation.”